2G math: Who’s wrong, CAG or UPA?

NEW DELHI: The government's fresh offensive against the CAG does not seem to have fazed the auditor which is sticking to its estimate of presumptive loss from government's failure to auction 2G spectrum in 2008.

On a day when the government fielded heavy guns — finance minister P Chidambaram, telecom minister Kapil Sibal and I&B minister Manish Tewari — to run down the federal auditor, CAG officials rejected the charge of sensationalism levelled against them.

While chief auditor Vinod Rai and his deputies were inaccessible, senior officials defended their math, arguing that the estimate of presumptive loss was based on solid assessment and records provided by the government itself.

For instance, they said one of the bases of the CAG's estimate was the fee that S-Tel, a company which was allegedly discriminated against by then telecom minister A Raja, had offered to pay for spectrum.

Based on the offer that S-Tel made on November 5, 2007, the price of spectrum would have stood at Rs 67,000 crore, much above the Rs 12,000 crore that the government managed under the 'first come first served' scheme Raja claimed to have followed. That is not all, S-Tel in a letter to the PM offered to up its offer to match any counter bid.

Sources pointed out that in its report, CAG had given three presumptive loss figures to illustrate the value of 2G spectrum allocated to 122 licencees in 2008 — Rs 57,000 crore based on sale of equity by new licencee Swan, Rs 67,000 crore based on S-Tel's offer and Rs 1,76,000 crore based on the proceeds from the 3G auction.

CAG sources said the auditor, while putting these figures, had stressed that "any loss ascertained while attempting to value 2G spectrum allocated to 122 licencees can only be 'presumptive', given the diversity of determinants such as scarcity value, the nature of competition, business plans envisaged, number of operators, growth of sector etc which, depending upon the market situation, would throw up the price that it commands at a given point of time".

CAG's report on 2G spectrum had clearly said that arriving at a precise value of spectrum could have been possible only through an efficient market discovery process, and the study was only presumptive.

While the government lost no time in attacking the CAG based on poor returns from the recent auction of 2G spectrum, CAG sources said the aggression failed to take into account the dual technology given out to telecom firms that had been presumed to be worth Rs 37,000 crore, as well as extra spectrum held by some operators worth another Rs 37,000 crore. The two, if put together, amounts to Rs 74,000 crore and if deducted from the presumptive loss of Rs 1.76 lakh crore, leaves Rs 1.02 lakh crore as the CAG's figure for 122 licences.

Major profitable circles in the present round of auction, such as Mumbai, Delhi, Karnataka and Rajasthan which together could account for more than 50% of the estimated revenue the government was hoping to garner, were skipped by the companies.

The government's failure to receive bids for profitable sectors was also because some players in these circles already held 900 MHz spectrum and they may not need additional airwaves in these circles, a senior CAG official said.